Conservative Intellectuals Embrace FDR, Jump Off Cliff

Email Print
FacebookTwitterShare

Conrad
Black, the Canadian newspaper publisher, has written a five-pound,
1,280-page biography, Franklin
Delano Roosevelt, Champion of Freedom
, just published by
Public Affairs Press. This is as worshipful a biography of FDR as
has ever appeared, giving him credit for "the reinvention of
the American state." Black claimed FDR was "the savior
of American capitalism and the foremost reformer in the country's
history." Black hails FDR for "overcoming the Depression"
and winning World War II. Black says flat-out that "Franklin
D. Roosevelt was the most important person of the twentieth century."

Black's
work comes long after the tidal wave of pro-FDR books which swept
across the American literary landscape from the 1940s through the
1970s and wasn't spent until the 1990s. Included were memoirs by
dozens of New Dealers, almost all of whom are gone, and multi-volume
works by pro-FDR political historians like James MacGregor Burns,
Arthur M. Schlesinger, Jr., Frank Freidel and Kenneth S. Davis,
who are either dead or in the twilight of their careers.

The
current trend is for books to be more critical of FDR. There have
been a number of books about FDR's devious entry into World War
II and his handling of the war, most recently Thomas Fleming's The
New Dealers' War
(Basic Books, 2002). Meanwhile, dozens
of economists at major universities around the United States have
investigated the effects of FDR's New Deal policies, and I report
their overwhelmingly negative findings in my new book FDR's
Folly, How Roosevelt and His New Deal Prolonged the Great Depression

(Crown Forum, 2003) — which Conrad Black attacked in a Wall
Street Journal op-ed (October 29), to which I
replied
(November 6).

Franklin
Delano Roosevelt, Champion of Freedom is noteworthy because
the author, a member of the British House of Lords, is reputedly
to the right of Margaret Thatcher and is married to conservative
political columnist Barbara Amiel. The jacket of Black's book features
enthusiastic blurbs by such noted American conservative intellectuals
as Tom Wolfe, George F. Will and William F. Buckley Jr., plus Henry
Kissinger who was Secretary of State under Republican presidents.

Of
course, it's no secret that big government conservatives dominate
what passes for a conservative movement these days. Both Ronald
Reagan and Newt Gingrich expressed admiration for FDR.

Do
conservative intellectuals really understand what they're embracing?
One needn't get into FDR's war policies. FDR's New Deal was bad
enough, and as noted Conrad Black celebrates both.

Contrary
to Black's claim that FDR helped "banish the Depression,"
FDR's New Deal failed to resolve the most important problem of the
era, namely unemployment that averaged 17%. FDR came to power in
March 1933, the worst point of the Great Depression, with a quarter
of workers unemployed, and during the next three months there were
heartening signs of a rebound. Nondurable goods manufacturing jumped
35%, durable goods manufacturing jumped 83%, and the stock market
started to rise. At this rate, unemployment would have been down
to about 5% by the fall of 1934.

However,
investors and businessmen soon realized how FDR's fabled "Hundred
Days" of madcap legislation would throttle business. For example,
the Securities Act, passed on May 27, 1933, made it more difficult
for employers to raise capital. On June 16, 1933, FDR signed the
National Industrial Recovery Act, authorizing some 700 industrial
cartel codes (1) to force wages above market levels, which discouraged
employers from hiring, and (2) to force prices above market levels,
which discouraged consumers from buying. To maintain high prices,
production was cut back — the opposite of what was needed
for recovery. The economy had a relapse as manufacturing declined,
and the unemployment situation failed to improve.

In
May 1935, when FDR was planning to extend the National Industrial
Recovery Act, the U.S. Supreme Court struck it down as unconstitutional.
That summer began the longest sustained recovery of the 1930s, as
entrepreneurs were freed from monstrous NIRA regulations. Nondurable
goods production increased more than 25% from May 1935 to May 1937.
Durable goods production was up 55%, and the stock market was up
60%. Unemployment fell to 14.1%, the best FDR ever did before the
government began conscripting millions of young men for World War
II.

What
did FDR do when faced with economic recovery? He signed the Banking
Act (1935), centralizing power at the Federal Reserve in the Federal
Reserve Board, thereby increasing the risks that inevitable human
errors by a small number of people would harm not just a city or
a region but the entire country. Their first bad call came in 1936
when they hiked the Fed discount rate 50%, triggering a monetary
contraction. FDR also secured passage of the Social Security Act
(1935) that established excise taxes on payrolls as well as excise
taxes on individual compensation — making it more expensive for
employers to hire people, thereby discouraging hiring. Moreover,
FDR signed the National Labor Relations Act (1935) that promoted
compulsory unionism, and the Supreme Court's decision upholding
the NLRA unleashed a campaign to unionize mass production industries.
The cost of hiring jumped 11% in a single year — 1937 — leading
to massive layoffs. Finally, FDR secured passage of "soak the
rich" taxes including an undistributed profits tax, making
it harder for employers to accumulate capital. Result: FDR's depression
of 1938, a unique depression within a depression. FDR tried to revive
the failed National Industrial Recovery Act, and when this effort
didn't go anywhere, he launched an unprecedented barrage of antitrust
lawsuits against about 150 large employers and industries, keeping
businessmen tied up in court, rather than focusing on growth and
jobs.

I've
cited only a few of FDR's policies that prolonged the Great Depression,
all covered in FDR's Folly. Here are some others:

  • FDR
    tripled federal taxes from 1933 to 1940.
    Excise taxes,
    personal income taxes, inheritance taxes, corporate income
    taxes, dividend taxes, holding company taxes, everything went
    up.

  • FDR
    discouraged private investment
    with his frequent tax hikes
    (1933, 1934, 1935, 1936) and with his denunciations of investors
    and employers ("economic royalists").

  • FDR
    channeled government spending and loan programs AWAY from
    the poorest people (who lived in the South)
    , thereby undermining
    claims that the New Deal was compassionate. The bulk of New
    Deal spending and loan programs went to political “swing”
    states in the west and east, where previous election returns
    had been close. From FDR’s standpoint as an incumbent, there
    wasn’t any point giving a lot of money to the South, even
    though it was the poorest region, since voters there were
    already solidly Democratic.

  • FDR
    forced food prices, as well as the prices of manufactured
    goods and services, above market levels and outlawed discounting
    .
    People were fined and even jailed for cutting prices during
    the New Deal. Such policies penalized over 100 million American
    consumers and discouraged buying.

  • FDR
    promoted the large-scale destruction of food when millions
    were hungry
    , by paying farmers to plow under some 10 million
    acres of crops and slaughter and discard some 6 million
    farm animals. This program enriched big farmers who had more
    food to destroy than small farmers. Black tenant farmers,
    who depended on work, were devastated.

  • FDR
    broke up the strongest banks
    , with the lowest failure
    rate, namely big city banks like J.P. Morgan that diversified
    by engaging in both investment banking and commercial banking.
    FDR didn't do anything about unit banking laws that accounted
    for 90% of bank failures by preventing small banks from diversifying
    with branches. Federal deposit insurance failed to stop bank
    failures — it transferred the cost of bank failures from bank
    shareholders and depositors to taxpayers.

  • FDR
    promoted government monopolies
    , the biggest of which was
    the Tennessee Valley Authority, subsidized by the 98% of American
    taxpayers who didn't live in the Tennessee Valley and exempt
    from state and federal taxes and regulations. Despite such
    monopoly power, income in the TVA southern states lagged income
    in the non-TVA southern states (like Georgia, North Carolina
    and Virginia) by widening margins, and the TVA flooded more
    land than it saved!

  • Touted
    as a champion of democracy, FDR amassed vast arbitrary power
    ,
    and even though the Democratic party controlled the White
    House and both houses of Congress, FDR issued 3,728 executive
    orders — more than all his successors combined.

  • From
    the beginning to the end, the New Deal was an attack on economic
    liberty
    , telling businesses how much they could produce,
    how much they had to pay people, how much they could charge,
    making it illegal to sell certain products (like milk) across
    state lines, suspending the rights of creditors, breaking
    up lawful businesses, dispossessing thousands of people to
    make way for government TVA dams and other projects, denying
    workers the right to choose whether to join a union, seizing
    the gold of peaceful citizens, using the tax code to punish
    some people and favor others, on and on.

Supreme
Court justice Louis Brandeis praised FDR for trying these "experiments,"
and many commentators now say the same thing. Yet FDR's policies
were only experiments to the degree FDR was unaware of what had
been tried and failed before. There was a substantial literature
about the failure of high taxes, subsidies, regulations and government
gold hoarding — Adam Smith's Wealth
of Nations
was just the best-known work on the subject.

Ironically,
the August 2003 publication of a lost manuscript, That
Man, An Insider's Portrait of Franklin D. Roosevelt
,
by FDR's attorney general Robert Jackson, who died in 1954, affirmed
the folly of FDR's New Deal. Jackson wrote, "It always seemed
to me that the President was at his weakest in dealing with economic
or business problems [like the Great Depression!]…The President
was not given to thought in economic terms…the President…did not
impress me as being grounded in economic theory or practice…economics
did not appear to be his long suit…the President's lack of aptitude
for economic matters…the economic philosophy of the Administration…was
bogged down in conflict and confusion."

Political
historians and apparently conservative intellectuals give FDR credit
for handling the political crisis of the 1930s, but the most
important factor in the crisis was double digit unemployment prolonged
by FDR's own New Deal policies.

By
embracing FDR's taxes, subsidies, regulations and arbitrary power
— never mind his war policies — conservative intellectuals appear
to be joining ranks with Democratic presidential candidates Howard
Dean, John Kerry, Richard Gephardt and Wesley Clark. What's left,
intellectually, of the so-called conservative movement?

November
17, 2003

Jim
Powell [send him mail]
is a senior fellow at the Cato Institute and editor of Laissez
Faire Books
. He is the author of The
Triumph of Liberty
and FDR’s
Folly: How Roosevelt and His New Deal Prolonged the Great Depression
.


        
        

Email Print
FacebookTwitterShare